The news comes ahead of Downing Street summit on online pornography later today, when Microsoft, which operates Bing and Yahoo search engines, is expected to announce it is introducing similar terms.

David Cameron, the Prime Minister, told the Daily Mail the decision by the two Internet giants represented a “really significant step forward" after the companies had insisted that it "couldn't be done, shouldn't be done".

Despite praising the efforts of the company, Mr Cameron said that the move may not go far enough, threatening legislation if the firms refuse to do more.

“We learnt from cases like the murder of Tia Sharp and April Jones that people will often start accessing extreme material via a simple search in one of the mainstream search engines,” the Prime Minister said.

Google and Microsoft, who cover 95 per cent of the market, had originally argued against the very principle of blocking the material, claiming it could not and should not be done.

New algorithms, sets of instructions for software, have now been developed which block illegal pornography and pathways to illegal content.

Auto-complete features which prompt child abuse search terms will also be blocked. The system is designed to pick up on new code words or terms paedophiles start to use and block search results for these too.

Google has offered to share the technology it has developed in the fight against online pornography with other companies.

While Mr Schmidt admitted that “no algorithm is perfect”, he pledged that his company would give technical support to those trying to combat child pornography.

“While society will never wholly eliminate such depravity, we should do everything in our power to protect children from harm,” he said.

The Internet companies will also work alongside the National Crime Agency and the Internet Watch Foundation to target “peer to peer” file sharing networks which paedophiles use to contact each other.

Mr Cameron added: “If the search engines are unable to deliver on their commitment to prevent child abuse material being returned from search terms used by paedophiles, I will bring forward legislation that will ensure it happens.

“There are some terms that are so shocking and unambiguous that I believe they should return nothing at all. It's not an infringement of free speech, it's responsible business practice.”

"But the government’s right that our industry can do more. So we’ve developed new technology to detect and remove videos of abuse, we are showing warnings against search terms related to child sexual abuse, and we are fine tuning our search engine to prevent this material appearing in our results.

" We hope this will make difference in the fight against this terrible crime”

John Carr, a child protection campaigner, added: “Google and Microsoft have really pulled out the stops. This is a very impressive initiative.

"It is narrowing the spaces in which paedophiles and collectors of child abuse images can operate. The challenge now is to work out how to gauge the effectiveness and learn from the various measures that are being put in place but I am sure there is a will so we can find a way.”